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rd - Quoted or nominal rate of interest on a given security. there are many different securities, hence many different quoted interest rates.
r* - real risk-free rate of interest, which represents the rate that would exist on a riskless security if zero inflation were expected.
IP - Inflation premium is equal to the average expected inflation rate over the life of the security. The expected future inflation rate is not necessarily equal to the current inflation rate, so IP is not necessarily equal to current inflation.
rRF - r* + IP and it is the quoted risk-free rate of interest on a security such as U.S. Treasury bill, which is very liquid and also free of most risks.
DRP - default risk premium reflects the possibility that the issuer will not pay interest or principal at the stated time and in the stated amount. DRP rises as the riskiness of issuers increases.
LP - Liquidity premium that is charged by lenders to reflect the fact that some securities can't be converted to cash on short notice at "reasonable" price. LP is very low for Treasury securities and for securities issued by large strong firms, but it is relatively high on securities issued by small firms.
MRP - Maturity risk premium is charged by lenders to reflect the risk of price declines.
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Is the price at which bonds sell determined by the interaction of stated rates of interest and market rates of interest?
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
When market interest rates exceed a bond's coupon rate the bond will?
When market interest rates exceed a bond's coupon rate, the bond will:
What are the determinants of investment?
1. Revenue: Economic Growth and Business Cycle 2. Cost: Interest rates and Taxes 3. Expectation: Stable economic and political condition of any country.
How can targeting interest rates result in inflation sprialing out of control?
It could cause a kind of rubber-band effect on inflation. For instance, if the market is trying to keep interest rates high and the fed keeps dumping money into the market to try to keep interest rates low, one of these forces has to give. The market is going to be suddenly flushed with cash and risks an event that causes what would normally be a natural decrease in interest rates. This would cause a huge interest rate fluctuation and subsequent inflation.
How can interest rates push a business cycle into a contraction?
High interest rates can promote saving, which in turn can cause a downturn in demand, causing surplus products on the market.
How do financial institutions calculate interest rates?
Financial institutions base their interest rates on fluctuation of today's market. If the market is doing well then interest rates are high. If the market is down, interest rates goes down along with it.
Is the price at which bonds sell determined by the interaction of stated rates of interest and market rates of interest?
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
What are determinants of the market size?
what are the determinants of the market size
What is market determinnts?
Markets are influenced by factors that can be called determinants. These include the overall economy's health, business expansion and reasonable interest rates. These factors go a long way to make for healthy markets.
When market interest rates exceed a bond's coupon rate the bond will?
When market interest rates exceed a bond's coupon rate, the bond will:
What are a few market interest rates?
Market interest rates vary almost every day. One could look up market interest rates by visiting financial websites such as MSNBC or etrade to look up the most recent rates. Rates are significantly higher now than they have been in the past.
What is the process of tracking and comparing mortgage interest rates held in a pool to current market interest rates is called?
pool analysis
How do money accounts differ from regular savings accounts?
The means of determining interest rate. Money market account interest rates are variable and track the money market. Savings account interest rates are usually fixed.
What are the determinants of investment?
1. Revenue: Economic Growth and Business Cycle 2. Cost: Interest rates and Taxes 3. Expectation: Stable economic and political condition of any country.
Where would one find interest rates for a money market account?
To find money market account interest rates, one would have to contact a bank or broker. That would be the best way to get the best rates currently in effect.
Has the recent economy reduced the money market rates ?
Money market rates have remained steady. They are typically very low compared to interest rates on CD's and stocks.
What bank has the highest money market rates?
Interest rates change daily among banks on money market accounts. To get the most current rates check bankrate.com
